Legal proceedings have begun against Yeung Chung-lung, the founder and former chairman of First Natural Foods, over false accounting and the alleged embezzlement of HK$84 million in corporate assets.

The Securities and Futures Commission, which is seeking orders that Yeung repay HK$84 million to the company, is also seeking disqualification orders against Yeung, Yang Le, the former chief executive and executive director of the firm, and Ni Chaopeng, another former executive director. Yang is the son of Yeung, and Ni is the son-in-law of Yeung.

The share price of First Natural Foods fell 1.5 per cent to close at 66 HK cents before the commission made the announcement last night.

At the first hearing of the SFC's petition, in the Court of First Instance yesterday, the SFC said Yeung, Yang and Ni were in breach of their duties owed to the company.

It said Yeung withdrew HK$84 million from the frozen food company's mainland bank account in December 2008, and that amounted to embezzlement of corporate assets, as it was without notice to the firm's directors or with their authorisation.

The commission said the bank statements the firm provided to its auditors in relation to the audited consolidated results for 2007 were false and/or had been fabricated.

While the statements showed a cash balance of more than 674 million yuan (HK$847 million) at the end of 2007, the SFC said, bank account statements obtained by the commission showed a balance of only about 20 million yuan on December 29, 2007.

The SFC also said Yeung had obstructed investigations by provisional liquidators, including the effort to regain control of Fuqing Longyu Food Development, the company's main operating subsidiary on the mainland.

It said Yeung had become unreachable since mid-December 2008 and refused to assist the provisional liquidators in their application for a change of Longyu's registration records despite a ruling by the Fuzhou Intermediate People's Court in 2009 that a resolution passed by the provisional liquidators replacing Longyu's board was valid.

First Natural Foods was listed on the main board of the stock exchange in 2002. The firm makes, processes, sells and trades in food products.

Trading in the company's shares was suspended from December 15, 2008 , three days after Yang, then chief executive, and several directors resigned, to September 5 last year. Provisional liquidators were appointed on January 7, 2009, to take control of the assets of the firm and its subsidiaries. They were discharged on September 4 last year after a restructuring of the company.

This article appeared in the South China Morning Post print edition as Ex-frozen food firm chief faces HK$84m payback